June 21, 2022
5 Ways To Avoid a Business Partnership Dispute in Florida
DISCLAIMER: The following is not legal advice, it is for informational purposes only. If you have a legal issue, please consult your own attorney.
After near twenty years of practice involving business disputes and partnership litigation, I thought to myself what it would be like if I could have just spoken to my client 3 years ago. Based on our experience in resolving business disputes, we came up with a few useful tips on how to avoid protracted litigation involving legal business partnership disputes in Florida. The information shared is not legal advice and is for informational purposes only.
1 - Clarity
Many business partnership conflicts emerge when partners have opposing value systems or long-term objectives for the company. Forbes suggests that partners discuss their perspectives on these problems and then collaborate to write a values statement. Current or potential partners should think about things like:
- the sort of growth strategy the company will use
- the leadership style the partners will use
- the type of work culture the partners wish to create
Partners can ensure that their aims for the business and ways to running it are largely congruent by knowing one another’s perspectives on running the business.
2 - Exit Plan
Business partners should evaluate numerous worst-case scenarios, such as significant financial losses, illnesses or even fraud to avoid future commercial disagreements and litigation. Early on, it’s critical for partners to agree on a strategy for dealing with business challenges. Once these stumbling blocks appear, it may be considerably more difficult for partners to make objective decisions, thus increasing the chance of conflict.
Examine all worst-case scenarios and devise an exit strategy that is beneficial to all stakeholders.
3 - Get to Know Your Business Partner
One of the most important ways to avoid a business dispute or partnership litigation is by really getting to know your partner before even getting into the particulars about the business. All too often, individuals call themselves partners even before really knowing the other partner’s goals and intentions. Folks who uncover substantial disputes with a partner after investing significant time, money, and resources in a business may believe they are too invested in the endeavor to abandon it – which leads to a spiral of continued misunderstandings and worse. Examining these difficulties early on, even before a partnership is formed, might help a person evaluate if the partnership is a bad idea.
4 - Draft a Formal Agreement
Instead of relying on their personal relationship to resolve future disputes, business partners should draft a formal partnership agreement. This legal agreement, according to The Wall Street Journal, should clearly define each partner’s duties, ownership, pay, and financial role in the business. The agreement should also include a plan for each partner’s exit.
Partners may benefit from speaking with an attorney when drafting this legal agreement. An attorney may be able to assist a person in determining whether an agreement addresses the majority of contingencies in a sensible and lawful manner. If a dispute arises despite an existing agreement, an attorney may be able to assist a person in seeking a quick resolution through litigation or other methods.
5 - Seek Independent Legal Counsel
There are websites where you can construct boilerplate operating agreements, which is a better option than doing nothing. However, if you want to make a career out of your business, the operating agreement is one area where you can’t afford to cut corners, especially if your partner is hiring a lawyer. To eliminate any bias, a business agreement should be customized to each particular company partnership, and each participant should use their own legal counsel.
It’s a very simply question with a very clear answer: Is the cost of upfront legal fees worth the risk of losing years of your life and potentially hundreds of thousands (if not millions) of dollars in the future? Absolutely.
Contact Information:
Farrow Law Firm
Janine Davis
954-252-9818
Contact via Email
www.FarrowLawFirm.com